KYB solutions: The evolving regulative environment around the world is making it harder for businesses to stay in compliance. According to a report, companies are facing 200 regulatory changes per day on average. That’s a lot of changes in a day. Adding to this major regulatory changes like PSD2, AMLD5, and AMLD6 are creating more challenges for the Financial institutes and Banks.
Diligence(CDD) and Know Your Customer (KYC)
These major regulatory changes not only require Customer Due Diligence(CDD) and Know Your Customer (KYC). These changes demand companies perform CDD and EDD for the entities they are doing business with and verify Ultimate Beneficial Ownerships (UBOs) of the companies. Know your business(KYB) checks are made necessary for the entities.
Now businesses need to maintain a central register of business ownerships so that the regulatory authorities could have direct access to the details of companies and their ownerships.
KYB solutions: Problems of Know Your Business (KYB)
Previously, organizations and banks have to perform KYB checks manually and they do not have direct access to the lists. So they had to either rely on google search or lookup multiple registers for data and then collect relevant information and analyze that data. In this manual due diligence process, the chances of errors increases and the process itself are time-consuming.
To further increase the complexity of the process, the increase in small businesses and startups made it more difficult to perform due diligence manually because of less or no business and ownership history available.
The Most Difficult Challenge For The Businesses
The financial institutions in the US and other global jurisdictions, Financial Institutes are striving to comply with regulatory changes and in a survey conducted by Reuters, 51% of the AML compliance leaders identified beneficial ownerships as the most difficult challenge for the businesses.
Shareholders of the entities you are doing businesses with may hide their information by using a network of shell companies or make misleading paper trails. In some cases, the paperwork is not available.
Even though business verification was not give importance in the past but with scandals like Panama leaks and others, authorities are demanding more from the businesses.
Another hurdle in the business verification process or KYB process is the global marketplace, which on one hand has created opportunities for businesses around the world to grow but on the other, it has created a few difficulties. For instance, the rules on UBOs are different in each jurisdiction. In some jurisdictions, UBO is not require at all. But if you are dealing with such entity and you live in regulated jurisdiction this may cause problems.
if you are an entity that complies with regulatory authority, you may get in big trouble if any of your transactions are made to the accounts linked to money laundering, terror financing or tax evasion.
KYB solution providers: Need of the hour?
How to perform business verification?. Is the question entities are looking answers for? Just like KYC, many organizations are performing KYB. Experts believe this is the most feasible for know. Just as with KYC, if we automate the KYB process by handing it to third-party KYB solution providers.
Business verification, as told earlier is a bit complex than an individual’s verification. It not only requires the verification of the business. As an entity but also requires the verification of the ownership and partnership.
Third-Party KYB Solution Providers
Luckily the advancement in technology, especially in RegTech, has eased the challenge for business verification. Businesses can now hand over this job to third-party KYB solution providers and focus on core tasks within the organization.
AI-based Business verification solutions use state of the art Artifical Intelligence. And machine learning-based systems to help in verification of the businesses all across the globe.
So to avoid complexities, headaches and potential errors. It is better to have automated KYB checks in place just as KYC checks.